German economics minister sees no risk of recession

German Economy Minister and vice chancellor Philipp Roesler arrives to present the government outlook for growth in the German economy during a press conference. Berlin downgraded its projection for the whole of 2012 to 0.7 percent from a previous estimate of 1.0 percent. Leaked reports suggested a downwards revision as Europe's top economy begins to suffer from the eurozone debt crisis. (ODD ANDERSEN/AFP/Getty Images)

As the European debt crisis continues to bite, the affect is finally being felt in Germany, which had so far remained remarkably unscathed. In particular the slowdown in demand in Europe is impacting the German economy.

Growth in 2011 had been 3 percent, but on Wednesday Berlin said it expected GDP would only grow by 0.1 percent in the first quarter of the year, following a contraction of 0.3 percent in the last quarter of 2011. But it expects things to pick up next year, with growth reaching 1.6 percent — as long as the European debt crisis doesn’t get any worse.

The report also stated that the slowing demand in Europe and other countries affected by the crisis had dented exports. And it predicted export growth would only reach 2 percent in 2012, quite a drop from the 8.2 percent growth in 2011.

Roesler, the leader of the pro-business Free Democrats and junior partner to Chancellor Merkel’s Christian Democrats, told the parliament on Thursday that the country was merely experiencing a temporary “growth dent.”

“Germany will remain on a growth track in 2012 as well,” he said, arguing that Germans had reasons to be optimistic.

Presenting the annual economic report for 2012 to the Bundestag, Roesler argued that there were now more jobs, higher pensions and lower welfare payments.

The opposition was left unimpressed, accusing the minister of embellishing facts. Hubertus Heil of the center-left Social Democrats said Roesler was ignoring the reality that Germany as an exporting nation was reliant on the economic developments in Europe.

Green party floor leader Fritz Kuhn was equally scathing of what he described as the minister’s attempt to “whitewash” the facts. He said he had serious doubts about the government’s growth predictions and warned that focusing on austerity was a mistake and that there had to be investment alongside savings.

Meanwhile, there was support in the Reichstag for Roesler from the government benches. “The situation is anything but bad,” Michael Fuchs of the Christian Democratic Union retorted. “And we won’t allow ourselves to be badmouthed by the opposition.”

The Germany Industry Association (BDI) seems even more optimistic than the government. BDI president Hans-Peter Keitel announced on Thursday that he predicted Germany could reach 1 percent growth this year and warned against “exaggerated worries” over a slowdown.